Date:12/07/2007 URL: http://www.thehindubusinessline.com/2007/07/12/stories/2007071250720300.htm

Back GSPC mulls overseas arm for exploration abroad

Has interests in 8 blocks in Australia, East Timor, Egypt, Yemen

Virendra Pandit
Pratim Ranjan Bose

Ahmedabad, July 11 The Gujarat Government is actively considering floating an overseas subsidiary of Gujarat State Petroleum Corporation (GSPC) to undertake exploration and production (E&P) activities abroad. The proposal was prompted by the roughly $250-million (Rs 1,000 crore) investments already committed on overseas assets during the next three to four years. This is against GSPC’s turnover of Rs 1,766 crore in 2005-06.

GSPC has interests in a total of eight blocks in Australia, East Timor, Egypt and Yemen. The company is an operator in five blocks, both offshore and onshore, in Egypt and Yemen. Oilex is the operator in Australia (three blocks) and East Timor assets.

“We want to make GSPC an international player in the E&P sector. The company has already bagged a number of fields abroad. A board-level committee has been formed to suggest modalities for carrying out our overseas E&P interests in the future. The committee is expected to submit its report within a month following which the board will take a final view,” the State Energy Minister, Mr Saurabh Patel, told Business Line.

Elaborating on the issue, a GSPC official said that the company had committed an investment of $150 million in two Egypt blocks and another $45 million in three Yemen blocks for the next three years during the bidding process. Similar commitments are also made to Oilex while securing participatory interest in Australia and East Timor.

“We have committed time-bound investments abroad. Considering GSPC has a limited balance sheet capacity, it may be prudent to float a SPV for undertaking the overseas activity to safeguard GSPC from the risks involved,” the official said.

“The board will explore various options in consultation with international advisors before taking a decision,” the official said.

Exploration activity may start in Egypt next month. While initial profit sharing agreements are signed in both Egypt and Yemen, the company is expecting to enter into a formal pact with the Egyptian authorities next month.

“Once the pact is in place we have to launch 3D seismic activity followed by drilling of six wells in the 2,500 square km offshore block (North Hap’y) over a period of four years. In the onshore block (South Diyur) we are committed to 509 sq km 2D survey followed by 200 sq km of 3D survey and drilling of two wells,” the official said.